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Credit Union Personal Loans: An Accessible, Low-Rate Option

Oct. 23, 2019
Banks & Credit Unions, Loans, Personal Loans
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Your local credit union should be your first stop for borrowing money, especially if you have a fair or poor credit score (below 690). Credit union personal loans often have benefits over other lenders, including:

  • Typically lower interest rates.
  • More flexible terms.
  • Loan officers willing to consider factors beyond your credit score.

How a credit union personal loan works

Credit unions are not-for-profit financial organizations that serve members who live, study, work or worship in a particular area. They are controlled by members, who elect volunteer board members to oversee the organization.

If you meet the credit union’s requirements, you typically pay a one-time membership fee and a deposit of up to $25. You need to become a member before you apply for a loan.

» MORE: Credit unions vs. banks: The difference and why it matters

Many credit unions offer both unsecured and secured personal loans. Both types of loans carry fixed rates, and the rate you’ll get depends on your credit score, credit history, income and debts.

A low credit score alone won’t disqualify you from getting a loan. Credit unions also consider your whole financial picture, including your credit history and standing as a member with the credit union, when reviewing your loan application. Still, a good score will get you a lower rate than someone with bad credit, so it pays to know your score.

Credit unions come in many sizes, so the application process, approval criteria, rates and other aspects of a personal loan vary. Some allow online-only applications; others may require you to start the application online and visit a branch to complete paperwork.

» MORE: NerdWallet’s best credit unions

Credit union personal loan rates

There are two types of credit unions: federally chartered and state-chartered.

At federal credit unions, annual percentage rates on most types of loans are capped at 18%. Your credit union may choose to charge an application fee that isn’t part of the APR.

Over the past five years, federal credit union loan APRs on three-year loans have averaged 9.29%, while banks charge 10.18%, according to data from the National Credit Union Administration.

State-chartered credit unions have charged an average APR on loans with all term lengths of 11.43% over the past five years, according to economists with the Credit Union National Association.

Here are personal loan rates from three NerdWallet-rated credit unions:

LenderTypical APR rangeLoan amounts
Alliant Credit Union4.5 stars out of 56.49% - 27.0%$1,000-$50,000
Navy Federal4 stars out of 58.19% - 18.0%$0-$50,000
First Tech Federal5 stars out of 5 10.0% - 18.0%$500-$50,000

Credit union vs. online lender

Some banks also offer personal loans, but they typically give the lowest rates only to those with excellent credit profiles. Online lenders offer loans for bad credit borrowers, but they don’t always consider your overall financial picture.

LenderMin. credit scoreTypical APR rangeLoan amountGet started
Upgrade
4.5 NerdWallet rating
6006.98% - 35.89%$1,000-$50,000
at Upgrade
Upstart
4.5 NerdWallet rating
6205.67% - 35.99%$1,000-$50,000
at Upstart
LendingClub
4.0 NerdWallet rating
6006.95% - 35.89%$1,000-$40,000
at LendingClub
Click “Check Rate” to pre-qualify on NerdWallet and receive personalized rates from multiple lenders.

There are some downsides to personal loans from a credit union. Many credit unions and banks alike conduct a hard credit check on applications — which can cause a small temporary dip in your credit score — while online lenders typically perform soft credit checks to see if you pre-qualify for a loan.

Credit unions also may not have the online or mobile banking technology you would find from a bank or online lender.

But loans from credit unions tend to be cheaper than those from online lenders, especially for borrowers with bad credit scores. The average rate online lenders charged to customers with fair credit scores (from 630 to 689) is 21.8%, according to NerdWallet’s 2018 survey of lender rates.

» MORE: Compare rates from multiple online lenders

Payday alternative loans

Some credit unions offer members payday alternative loans, which are small installment loans regulated by the NCUA. According to the organization, these loans:

  • Can have an application fee of no more than $20.
  • Are from $200 to $1,000.
  • Have a repayment term of one to six months.
  • Come with a maximum APR of 28%.

A borrower must be a credit union member for at least a month before taking out a payday alternative loan, according to the NCUA.

Credit unions that offer these loans often don’t look at a borrower’s credit score, but instead consider a borrower’s income and ability to repay the loan.

Next steps

If you’re already a member and you can withstand a temporary hit to your credit score, a credit union may get you the cheapest loan. NerdWallet recommends comparing loans from multiple lenders.

You can pre-qualify with multiple online lenders on NerdWallet and compare your estimated rate with one from your credit union.

 

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